Special Purpose National Bank Charter for Fintech Companies

Position

  • ICBA continues to have serious concerns with the Office of the Comptroller of the Currency’s (OCC’s) decision to move forward with issuing special purpose national bank charters for financial technology (fintech) companies that could be used to access the banking system and avoid state licensing and consumer protection laws. ICBA believes the OCC should have explicit statutory authority from Congress before proceeding. Any new federal charter should be subject to the same standards of safety, soundness and fairness as other federal chartered institutions.
  • ICBA has been very concerned about the regulatory advantage currently enjoyed by online marketplace lenders and supports a regulatory framework for online lenders that is no less stringent than the framework that applies to community banks.

Background

The OCC has indicated that it will move forward with issuing a limited purpose federal bank charter that would be designed to accommodate certain banking services for online marketplace lenders and other fintech companies, possibly including payment processors. While such a charter would subject the online lenders and fintech companies to more oversight and regulation than they now have—particularly in the area of consumer protection—ICBA is concerned that such chartered institutions would be subject only to limited safety and soundness supervision and examination and would not be subject to the Community Reinvestment Act. ICBA believes that the OCC should have specific legal authority from Congress before proceeding. Furthermore, the OCC should issue rules, subject to notice and comment, which would prescribe the scope and requirements of the charter.

ICBA believes that the recent problems that some of the online marketplace lenders have experienced with liquidity and earnings, as well as with compliance, make it important that these lenders be subject to safety and soundness supervision and regulation. These companies have not experienced a serious economic downturn yet and already they have been subject to serious funding and capital issues. Furthermore, ICBA has also seen how other limited purpose bank charters have evolved—such as industrial loan companies—and is concerned that any limited purpose fintech bank charter could end up having all of the advantages and benefits of a full-service bank charter with limited supervision and regulation.

A fintech regulatory framework that is no less stringent than that which applies to insured depository institutions would promote a fair regulatory system, protect consumers, and support safety and soundness at these unregulated companies.

Staff Contact: Chris Cole